Strategic Plan Development and Execution
It is the potential for significant growth that commands a premium in shareholder valuation. The strategic plan is not just to maximize earnings this quarter, or next quarter, or even next year. In the quest to create shareholder value, the strategic plan is to achieve the Mission, and for the company (and given the business it is in) that will inevitably maximize the area under the curve where earnings are the y-axis and time is the x-axis. And that is not easy. In fact, the other dimension to the valuation model is probability. The more the strategy is credible, the better the plan is structured, the more the management team is execution-focused – then the closer to 1.0 will be the probability factor.Most plans don't work
Let's be honest, most strategic plans simply don't work. It is rarely clear whether, and in what proportions, that is because the strategy was flawed, the plan wasn't sufficiently detailed and executable, the measurement and feedback systems to monitor compliance were insufficient, the people (from senior management down) "didn't get it", or they just didn't do it (which speaks to misalignment of values compared to those necessary for the success of the mission). Probably, to some extent, all of the above. And other reasons. We could go on - but that is dispiriting, especially when one thinks of the enormous amount of time and money that is expended each year on strategy.
But there has to be a plan
Yet we all know that without clear vision and mission, and a strategy to achieve them with executable strategic objectives driving resources and initiatives, then the company or SBU is adrift in the business universe. It may do well, for a while, but the absence of an executable plan means the company is relying on luck. Being lucky is great, but it’s not much of a plan.
Creating a plan
Each company (or strategic business unit or “SBU”) and its strategic plan is unique. We don’t follow any one of the “canned” one-size-fits-all solutions. That being said, we do believe in a coherent, integrated, executable, measurable plan that crosses all functional areas and focuses on external customer facing issues along with traditional operating and accounting issues. An example of a methodology that does that is the Balanced Scorecard.
The mission and strategy, having been previously established, now need to be detailed into strategic objectives and operating measures to achieve them. It is critical that there is executive management commitment to the process and adequate time and resources made available for planning.
Books have been written on this subject and it is not our intent to do that here. In summary, via a series of management meetings and off-sites, lead by the internal strategy “architect” and assisted by external consultants, consensus is reached on the plan elements. The plan elements include: the determination of the number of dimensions (or “perspectives”) that underpin the strategy (usually finance, customer, business process, and human performance); the key strategic objectives associated with each dimension; the performance drivers (“KPI’s”) that will be leading indicators of the success of the strategy and the “core outcomes” that will provide historical data validation (lag indicators) that the strategic objectives have been achieved. All of the foregoing needs to be driven down through operating units, to departments, and even to individuals (referred to as “cascading”). As one might imagine – this is a lot of work.
One of the areas of greatest difficulty we typically see is “getting the data.” This is often a significant challenge in two different ways. The first is that many of the performance measurements required (both lead and lag) may be at core qualitative (e.g. customer satisfaction) or simply something for which no measurement system has been developed (e.g. ROI on marketing initiatives). The second is the challenge in capturing existing data from disparate enterprise systems and building a strategy measurement and reporting framework that is accurate and reliable. While, ultimately, these challenges have to be met, we counsel not to delay the strategy process until measurement systems are perfect. They never will be, and it is amazing how a little creativity can deliver quite accurate estimates. Management is sometimes an art and making good decisions in the absence of complete or accurate data is what superior managers do.
Executing the plan
The plan now needs to be rolled out. Data capture and operating responsibilities need to be detailed, new system requirements identified and work on them has to begin, and performance against plan needs to be embedded in the management systems and consciousness of the company.
We have seen companies where every employee knows and understands the overall strategy (at some conceptual level) and his/her roles and responsibilities in support of the plan. Ideally, each employee would have on his/her desk a statement of personal goals and objectives. This is not achieved without a significant effort in communication and education. Indeed, involving employees early and encouraging them to provide ideas and suggestions not only is a good idea because of the improvements they will identify, but also because that level of involvement gains their commitment to the strategic process.
Teams at different levels of the organization need to be formed to translate strategic objectives into relevant, applicable objectives for their own department or functional area. This is similar to providing financial objectives (“MBO”) but also critically different because this is not “given” by finance but instead personally developed in response to the strategic plan.
The links to the compensation plans of the company need to be developed. People behave according to how they are compensated. Obviously, affecting people’s pay is a very sensitive subject. Accordingly, this is a step that is taken only after much of the strategic planning process is executed in other areas. One of those is the link to financial reporting and budgeting systems. The dashboard needs to be modified to monitor progress against the strategic plan.
The whole plan probably cannot be executed at once. For a large company it is not possible, and it will therefore be desirable to roll out the plan in a series of phases. Stanton Associates can facilitate the process at each phase and stage to ensure a successful plan roll out.